Does graft keep OPEC weak?

The Organization of the Petroleum Exporting Countries was founded in Baghdad in 1960 by five countries — Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela. It later expanded to the current twelve members.

Except for a few OPEC countries, most rank low on Transparency International’s corruption perceptions index. That may be a reason why OPEC struggles to be effective.

The purpose of the Vienna-based cartel is to allocate production among members. By controlling the supply of the world’s crude oil, OPEC aims to control the price as well.

The results have been mixed.

Some countries cheat and pump more oil than allowed by their quotas. A Bloomberg report a few years ago showed that members had pumped nearly 2 mllion barrels a day beyond the group quote. The biggest cheaters that year (2011) were Saudi Arabia, Venezuela, Nigeria, and Angola.

And there’s lots of non-OPEC oil around. OPEC now supplies about a third of the oil consumed globally each day. In March OPEC production was 29.6 million barrels a day.

Founder of the FCPA Blog and Editor at Large. He has been named multiple times as one of the 100 Most Influential People In Business Ethics by Ethisphere Magazine and is a Trust Across America Top Thought Leader. He’s a member of the DC, Virginia, and Florida bars. His At Large column is a regular feature of the FCPA Blog.

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